Not surprisingly, mortgage application activity rose 10.3% in the week ending Nov. 4.

"Treasury rates dropped last week, as renewed turmoil in Europe once again led to a flight to quality, and 30-year mortgage rates dropped to their second lowest level of the year," said Michael Fratantoni, Mortgage Bankers Association (MBA) vice president of research and economics.

The average contract interest rate for 30-year fixed-rate conforming mortgages declined nine basis points to 4.22%, Jumbo loan rates were down 12 basis points to 4.57%, while Federal Housing Administration rates slipped seven basis points to 4.02%, according to the MBA's weekly report.

This led to a 12.1% jump in the Refinance Index to 3967.5 — its highest level since the first week of October. Fratantoni noted as well that, "some lenders experienced even larger increases. As has been the case all year, many refinance applicants are opting to deleverage by choosing 15-year mortgages." As a percent of total applications, the refinance share jumped to 78.6% from 77.1%.

The Purchase Index also increased to 183.1 from 174.8, or 4.7%, as borrowers took advantage of historically attractive affordability rates. This is the highest level purchase activity has been since early August.

The early outlook for 30-year conventional prepayment speeds for November is flat to 1% higher on average. CPRs on 4.5% and 4.0% coupons are generally seen as unchanged to slightly lower from October. This is because most of the underlying borrowers that refinanced were able to close in September or October as they are the easiest to process.

December and January prepayments — this is when many of these applications are likely to close — speeds are projected flat on average, with slowing in 5%s and lower. The higher coupons are expected to increase around 2% to 5.0%.

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